Rising costs, including energy prices, on the German market are prompting local companies to relocate and expand their production plants in other regions of the continent; Poland has been successfully competing for such projects for years, says Paweł Tynel, partner at EY Polska.
Germany is the largest foreign investor in Poland
According to the study “EY Investment Attractiveness of Europe 2024”, in 2023 German companies were responsible for 16% of foreign direct investments (FDI) in Poland, which gave them the first place among European investors, and in the perspective of the last four years a round 200 investments. Investments from the industrial sector are flowing to Poland largely as a result of the growing importance nearshoring.
Too high costs in Germany
“The increase in costs, including energy prices on the German marketencourages local companies to relocate and expand their production plants in other regions of the continent. As a country, we have been successfully competing for such projects for years. There is no hiding the fact that the issue of business costs is of key importance here. Investors surveyed indicate that this is their main motivation. The second is access to qualified employees – which, in the face of increasing labor costs in Poland, is becoming our main advantage. In addition, the location and geographical proximity to target markets also help a lot, because every additional kilometer of delivery means additional costs and time for delivering products within the entire supply chain. However, we do not operate in isolation. Other countries in our region are interested in the same investments. However, Poland has a large domestic market, which may be of significant importance for some investments. Competition for projects is serious and there is no sentiment. Every government and country fights for new investments at home,” said Tynel, quoted in the release.
Foreign Direct Investment in Europe
EY points out that in 2023, Europe experienced its first decline in FDI in years. The number of projects was 4% lower y/y, and the number of jobs 7% lower y/y. Poland stands out positively in this context. Although the number of FDIs also fell in our region – by 3% compared to 2022, the number of jobs created increased by 21% y/y, the material states.
“It’s huge in this the role of German investorswho are once again among the top countries investing in our country. In 2023, they completed 36 projects in Poland, which is 16% of all foreign investments made last year and will generate employment for over 2,000 people. This gives German investments second place in terms of the number of incoming FDI, after the United States (52 projects, 9,805 jobs last year). The USA and Germany are significantly ahead of the other countries, accounting for over half (52%) of the jobs created thanks to FDI in 2023. The next places in the ranking are occupied by Great Britain (13 projects, 1,324 jobs) and France (12 projects, 794 jobs),” the press release continues.
Economic stagnation, which is turning into a slight decline in GDP in Germany itself in 2023, means that the number of FDIs in our western neighbors fell by 12% last year. This is one of the reasons that encourage German companies to invest more abroad, which is benefiting, among others, the CESA region. In recent years, the structure of foreign investments by German companies has changed, EY emphasized.
“We see an increased willingness for foreign direct investment in companies from industries such as machinery and equipment production (up from 8.5% of total German investment in 2019 to 11.6% in 2023), while the German software and IT industry is investing significantly less today (down from 10.9% in 2019 to 8.5% in 2023). Germany is the leader in FDI in the CESA region, and in recent years half of it has been related to industry,” Tynel pointed out.
Poland stands out in the region
Poland is one of the main countries in the CESA region that are in the orbit of interest of German capital (36 projects). Investors from across the Oder have invested more FDI in us than in Serbia (20 investments), Romania (16) or Hungary (15).
“The largest German investments are most often implemented in Silesia and Lesser Poland. This is where the four most important projects of the last five years have been located, which should generate a total of 6,800 jobs. These include, for example, the Mercedes electric delivery vehicle factory or the Bosch heat pump factory. These regions offer solid industrial infrastructure, qualified staff and a convenient location on the map of Poland, which facilitates logistics and supply chain management,” Tynel listed.
In addition, the development of industry in these regions, especially in sectors such as mining, metallurgy and manufacturing, makes them attractive to foreign investors looking for established industrial bases, he added.
As data from the EY report shows, 2023 ended with a decline in the number of US investments in Europe – by 15% y/y, by 29% from 2019 – which is caused, among others, by the country’s introduction of the “Inflation Reduction Act” system of incentives for investors.
(ISBnews)
